Smart Beta Value in a Newer Value ETF

There are scores of exchange traded funds with lengthy track records focusing on value stocks, but there are also some newer value ETFs that merit consideration. An ETF in the latter group is the Fidelity Value Factor ETF (NYSEArca: FVAL).

FVAL, which tracks the Fidelity U.S. Value Factor Index, debuted last year as part of a broader suite of smart beta offerings from Fidelity. That group of funds represented Fidelity’s initial foray into the fast-growing smart beta ETF space.

FVAL covers large- and mid-cap U.S. companies that have attractive valuations. Components exhibit historically high free-cash-flow yields, low enterprise value to EBITDA (earnings before interest, taxes, depreciation and amortization), low price to tangible book value and low price to future earnings.

FVAL, which debuted in September, is higher by nearly 9% year-to-date and hit an all-time on Wednesday. The ETF holds 130 stocks and is something of a departure from the standard value strategies that are often heavily allocated to the energy and financial services sectors. While financials are FVAL’s second-largest sector weight, the ETF’s combined financial/energy weight is barely over 20%.

Perhaps surprisingly, FVAL’s largest sector weight is 22.5% to technology. FVAL’s top three holdings are all technology stocks – Apple Inc. (NASDAQ: AAPL), Microsoft Corp. (NASDAQ: MSFT) and Google parent Alphabet Inc. (NASDAQ: GOOG).